Twenty years after its adoption, the euro remains a sensitive topic. The economic effects of the “single currency” are still bitterly debated, and each new study on the subject is used as an argument by “eurosceptics” or “europhiles”, depending on its conclusions. The latest research, published a few days ago by a German think tank, does not depart from this tradition.
In this study (available in English), researchers at Freiburg’s Centre for European Policy (CEP) claim that, of the 8 eurozone countries studied, only two – Germany and the Netherlands – have benefited from the single currency. They assert that the other countries, including France, have been penalised by the euro, which has slowed their economic growth.
The authors believe that without the single currency France would have been richer: they calculate a figure of around € 56 000 of “loss” per person for 1999-2017. Unsurprisingly, these conclusions have been widely relayed by French EU-sceptic parties such as RN (former FN) and La France Insoumise (on the left).
A difficult comparison
To arrive at their results the CEP experts looked for countries outside the eurozone with similar growth to the countries studied. Australia and the UK thus displayed, between 1980 and 1999, relatively similar growth to France’s. Then the researchers compared the progress of these two “guinea pig” countries to that of France in order to gauge the effects of the euro.
This method has been criticized. “There are several problems”, explains Alexandre Delaigue, professor of economics at the University of Lille. “First, the authors need to exclude as ‘guinea pigs’ countries which are very similar to France, simply because such countries are also members of the eurozone, whose effects they are studying. So they end up comparing France with Australia”. Which leads to a second problem: “Since the early 2000s Australia’s economy has been lifted by China, which needs lots of raw materials such as coal. Even without the euro France would not have exported more coal to China because it had almost no mines still working!”, says Alexandre Delaigue.
Beyond this difficulty in finding a country whose economy has the same characteristics as France’s, the study is criticized for its short time-span. “Germany found itself in a favorable situation, being able to export large quantities due to its industry. But tomorrow, when China no longer needs its technologies, China might then import a lot of luxury products, or services, both sectors where France is competitive. So if you run the same study in a few years’ time, France might appear as a ‘winner’ of the euro. This shows that currency is less important than exterior circumstances.”
“The question of the euro’s effects is very complex”, agrees Olivier Lenoir, economics project director at the Groupe d’Etudes Géopolitiques (GEG), a think tank at France’s Ecole Normale Supérieure. “We must always be careful with studies which come up with precise figures, without margins for error. In no way does this mean that the euro is perfect”.
The German siphon
Despite its limits, the study is a reminder that there are enduring imbalances within the eurozone. “The single market, with its free movement of capital and labor, has had a major effect”, says David Cayla, an economist at the University of Angers, and member of the group Economistes Atterrés. “It has led to a phenomenon of industrial polarization: industry became concentrated in a few countries, such as Germany, to the detriment of others.”